Let’s Make a Deal. The Monty Hall Problem shows us that, with two unopened doors left, the odds are 50-50 that the car is behind one of them. But when you stick with Door 1, you’ll win only if your original choice was correct, which happens only 1 in 3 times on average. If you switch, you’ll win whenever your original choice was wrong, which happens 2 out of 3 times.
Our brains are not wired to understand probabilities correctly. In the markets we are easily deceived.
Modifying our initial prediction seems to provide some advantage because our original choice is usually wrong.
Auctions ends when buyers are exhausted. That is why we sell strength and buy weakness. The top and bottom of auctions are ideal locations for adjusting our trade.
We teach using the RUT Cash Index Options only. We sell multiple puts & calls and we buy puts & calls to control margin and protect our credit. We trade the front month only to control calendar implied volatility risk. The trade is always a limited margin, limited risk trade. There is no need to find trades. We put the trade on at a certain point in the expiration cycle. The initial trade receives a net credit. We have time decay working on our side. We then use a mechanical adjustment approach to manage the trade.
The strategy is very consistent because 1) The initial trade is chosen for its adjustability. 2) We go into the trade planning to adjust it. 3) The profit target is a small portion of the available profit.